By Joel Hruska on January 16, 2013 at 3:22 pm
Recent news that a group of private equity investors might be in talks to buy Dell have sent the stock soaring in the past few days. Shares closed at $13.17 yesterday, compared to below $11 four days prior. The jump has been interpreted as proof that investors are cheered by the idea that Dell needs rescuing, and a number of pundits across the web shared quotes to that effect.
This chatter is the precursor to the really miserable Q4 results that everyone knows are coming. Dell hasn’t reported its own results yet, but preliminary sales info points to a widespread slump across the entire market. Overall PC
shipments fell 6.4%, Dell’s position in the worldwide market has slipped to third, and Windows 8 did nothing to boost sales. Dell has spent $13B on acquisitions since 2008, including $5B in 2012 alone. That’s enough to rattle plenty of cages.
shipments fell 6.4%, Dell’s position in the worldwide market has slipped to third, and Windows 8 did nothing to boost sales. Dell has spent $13B on acquisitions since 2008, including $5B in 2012 alone. That’s enough to rattle plenty of cages.
Looking at Dell’s financials, however, the need for a private equity buyout is a lot less clear. Note that Dell’s fiscal years are one year ahead of the calender year — fiscal year (FY) 2013 is calendar year (CY) 2012.
First, here’s the company’s gross margin split between Products (hardware) and Services (software). Dell has been making a push into enterprise offerings in recent years, where gross margins are significantly higher. While we already know Q4 is going to be ugly as far as unit shipments, Dell’s performance through Q3 looked good on the gross margin front. The revenue split between the two categories was 78.7% Products to 21.3% Services as of Q3 2013. That’s a shift from fiscal year 2010, the first year the company split revenue into those two categories. In FY 2010, the split was 82.6% hardware, 17.4% software.
). Dell has been making a push into enterprise offerings in recent years, where gross margins are significantly higher. While we already know Q4 is going to be ugly as far as unit shipments, Dell’s performance through Q3 looked good on the gross margin front. The revenue split between the two categories was 78.7% Products to 21.3% Services as of Q3 2013. That’s a shift from fiscal year 2010, the first year the company split revenue into those two categories. In FY 2010, the split was 82.6% hardware, 17.4% software.
That’s not a lot to show for $13B in acquisitions, but integrating new products and services takes time. How about net income — the amount of money left over when the bills are paid?
left over when the bills are paid?
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